...In his just released latest letter (below) Bill Gross piggybacks on this observation in what is one of the most scathing notes blasting the traditional of higher education, and in essence claiming that college, as means of perpetuating a broken employment status quo whcih redirect labor to a now-expiring Wall Street labor model, is now worthless: "The past several decades have witnessed an erosion of our manufacturing base in exchange for a reliance on wealth creation via financial assets. Now, as that road approaches a dead-end cul-de-sac via interest rates that can go no lower, we are left untrained, underinvested and overindebted relative to our global competitors. The precipitating cause of our structural employment break is both internal neglect and external competition. Blame us. Blame them. There’s plenty of blame to go around." And why college graduates have only a 6 digit loan to look forward to: "American citizens and its universities have experienced an ivy-laden ivory tower for the past half century. Students, however, can no longer assume that a four year degree will be the golden ticket to a good job in a global economy that cares little for their social networking skills and more about what their labor is worth on the global marketplace..."

The article reposts Bill Gross' usual insightful writing. Agree with him or not, he is a sharp man and one worth listening to. I fear his insistence on a massive goverment jobs program is going to run into the brick wall of empty public coffers, but you can expect many to echo his call.

It is nice to see that he is catching up to an issue that was reviewed in detail by Alan Hall back in the February issue of the Socionomist:

America's higher education business is about to hit a patch of trouble. It is in the late stages of a bubble, one that is credit-fueled, government-supported and widely popular.

A massive shift in society's attitudes toward education is beginning, as we shall see. If it continues in earnest, as we expect, educational institutions will soon encounter spectacular challenges to survival.

If your income depends on higher education, get ready by taking clues from the crumbling housing business...

Alan's article is a ten-page review of the state of higher education in the U.S., complete with supporting wave counts and variety of supporting evidence. The socionomic model once again proves its worth as a forecastsing tool relevant to your daily life - at least if you have kids that are headed to college, or work in a town or city reliant on a big university, or are like many of us who review our individual state budgets and see the vast sums of money steered towards higher education and know that it will become a ripe target in the coming years when "austerity" makes its trip from Europe to the U.S.

Edu-Bubble

This bubble is going to have multi-generational impacts, in my opinion. In the interests of full disclosure, I get my paycheck from a public university (my facility is operated under the University system). My particular facility makes 85% - 90% of its own budget every year from products & services, research grants from corporations and government and specialty analytical work. While we are a bit insulated from the "typical" attitudes of academia, we do get to see it in full force. And I can promise you that large academic institutions are in full-fledge denial that anything could ever change in the model used to deliver education to their students.

In an era when you can get an undergraduate level of education for free on Youtube from the Khan Academy in math and finance, the large education institutions are relying more and more on the credentialing and research aspects of their mission while lagging behind in lowering costs and providing better service seen in most every other "industry" touched by the digital revolution.

In my opinion, it is going to take a crash in revenues to change the model. Entire universities and university systems will go broke when revenues collapse. The new "rust belt" of the early 21st century may very well be a string of ruined "ivory towers" stretched from coast to coast.

Vast amounts of emotional energy and fiscal resources will be plowed into these institutions before they are allowed to finally die. Entire generations of men and women have a significant portion of their self-worth bound in their college experience. Soccer moms all across America who hover over their children, demanding they jump through the right hoops to get into the "best" colleges are not going to let their hours of work "helping" their kids prepare for the "best" schools.

But the crash will come.

Action Items

If a massive contraction in the education business happens, as I expect, expect a major social revolution on top of the financial problems that will beset those who rely on a university paycheck or from spending from university employees. If you are in that group (like me), have a Plan B.

And what happens when wave after wave of kids stop going off to college every year? Small and mid-sized towns see an exodus every year of talented kids who leave town and never come back. Some of those kids will still leave of course. All universities are not going to dry up and of course many will leave for larger cities and more opportunities there, but what happens when a higher percentage stay in their home towns?

Could the popping of this education bubble be the catalyst for the rebirth of more vibrant small and middle-sized towns? Pile on the other effects of a Grand Supercycle sized wave of negative mood and who knows, perhaps instead of just another generation of beer-drinkers, we might get a generation that become future civic leaders and small business owners.

There are surely many ways to play the potential for this retention of talent. Small business owners take heart, you may have a more talented pool to draw from in the coming years.

With the trend in mind I then visited the ever-useful socionomics.net site to confirm that Robert Prechter had done a similar, and much more thorough review over decade ago, entitled "Stocks and Sex: A Socionomic View of Demographic Trends." The report is well worth your time and I especially encourage you to think about some of the ramifications as we head into a period of negative mood as deep or deeper than anything the U.S. has experienced since its foundation as a Republic.

Mr. Prechter did his study on stock prices vs. births and conceptions. I took the CDC birth rate information as I think it provides a new riff to work from.

What jumps out at me is the flat-lining of the birth rate as SuperCycle Wave IV transitioned to the optimism of SuperCycle Wave V in the mid-1970's. SuperCycle Wave III was accompanied by a massive boom in the birth rate, a demographic "wonder to behold" as it were. As the Elliott Wave model teaches, "[t]hird waves are wonders to behold" with "favorable fundamentals (text, 10th edition, page 80). The birth rate certainly shows reflects this, tied in as it is with the socionomic concept that decisions are shaped in the aggregate by herding instincts wired into the brain and not necessarily pure, cold reason and rationality. Moving into Wave V, the birth rate flat-lined, showing small bumps in times of excessive positive mood, but in the main, remaining stagnant. The personality of a Wave V is described as always "less dyanmic" than a Wave 3 (text, 10th edition, page 80) and the data starkly confirm this observation.

Assuming I am correct and mood plunges into a deep negative bias for an extended period of time, one can expect the rate of births to plummet as well. While this is not something that may immediately impact your life, we need to think about what would drive such a collapse in births.

As Rome decayed and fell, birth rates collapsed as well. One path a significant number of Roman citizens took to act out their feelings of negativity in terms of birth rate was the adoption of fiercely anti-reproduction stances on the part of the rising Christian that eventually rose to dominate the Empire. Mr. Prechter touches on the demographic challenge faced by Rome, even before the rise of the Christians, and this fact has been noted by many scholars as a factor in, or the "cause" of the Fall of the Roman Empire. By using the new religion of Christianity to justify the adoption of a life aesticism and chastity, this enabled men and women to act out the negative herding impulse that had swept the Empire and that eventually brought about its decay and destruction.

Looking ahead what new philosophies might encourage or support and crash in the birth rate assuming demographic trends are driven by mood? A newly revived and ascetic Christianity that comes to dominate a large portion of the population? A brand new "green" religion that views humans as a destructive force and works to limit the birth rate to zero population growth or an outright decline through persuasion or force? A combination of plagues and a philosophical or religious shift in attitudes towards children and child birth?

It is a trend worth following and if you work for Gerber, you might be sweating out the coming years...

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About Me

This blog is a place for me to thrash out ideas on the huge tsunami of change that I think is approaching.
I'm deeply interested in financial markets and especially using Elliott Wave Analysis to find patterns. I view socionomics to be an immensely useful tool for analyzing current events. I think the next 20 years will mark a break point in human affairs not seen in five centuries.
Enjoy the ride, friends.